Posted
by
timothy
on Tuesday February 04, 2014 @09:45AM
from the layoffs-happen-to-public-firms-too dept.

schwit1 writes "Curious why Michael Dell was so eager to take the company he founded private? So he could do stuff like this without attracting too much attention. According to the Channel Register, the recently LBOed company is 'starting the expected huge layoff program this week, claiming numbers will be north of 15,000.' Of course, with a private sponsor in charge of the recently public company, the only thing that matters now is maximizing cash flows in an environment of falling PC sales, a commoditisation of the server market and a perceived need to better serve enterprises with their ever-increasing mobile and cloud-focused IT requirements — things that do not bode well for Dell's EBITDA — and the result is perhaps the largest axing round in the company's history. But at least the shareholders cashed out while they could."

If they can afford it. The charming thing about COBRA is that you get hit paying 100% of premiums when you can least afford it. Heaven forbid that we become a bunch of commies like those Canucks. I've heard that even the snow is red up there.

But at least you're getting a group-policy rate that the employer had negotiated, rather than an open-market individual/family rate. It's better than (pre-ACA) open-market plans, I suspect

Not always. I worked for the largest commercial real estate company in the world a few years ago. When I put in my notice, there was going to be a lapse of about 30 days between when my insurance would expire with my present employer, and when my new benefits would kick in with my new employer. When I received the COBRA notification explaining the details of my coverage (if I were to have chosen to take it), I was shocked. My premiums more than tripled....not exaggerating. Coverage for me and my you

Ugh! I can only imagine. I'm inferring that you (or someone you know) does, and I was (and am) grateful that I didn't have that complicating the matter to drive up the cost even further. While I'm not sure exactly who to believe any more in this whole Health Care Reform debate, and I do not thing the existing legislation is a complete and thorough solution, I'm glad that at least the issue of pre-existing conditions is being addressed. While I'm fortunate enough to not have that be a factor for me ye

There are so many variables when you buy insurance. I'm blessed with good health myself, but I have seen it happen to people.

I had a friend who had a brain tumor which meant he lost his job (truck driver). So, of course he lost his insurance and you can bet that insurance companies weren't jumping out of the wood work to cover him. Even Cobra is little help in a situation like that.

It's really stupid for insurance to be tied to employment. Only a single payer system makes sense. I would much rather pay taxes today to insure I am covered when I need it, vs our current system of paying premiums so 2 or 3 middlemen have a job and when you need the insurance you can't have it.

Indeed. During the communist era in China, each factory ran a school for the children of their workers. If someone changed jobs, their children had to change schools. Americans laugh at how insane that was, but the way we run our healthcare system is just as stupid. It is absurd for your employer to be involved in your healthcare.

Here is a complete, exhaustive list of everything that an employer should provide to their workers in exchange for their labor:

The ACA is, to put it charitably, a day late and a dollar short. I honestly hope it's better having that piece of garbage than not, but the only way that will really be true is if it leads to further changes. The US is the only country to rely on for-profit companies as the source of basic health insurance.

That's only guaranteed to be true if you coverage needs are the same as the plan your former employer offered, and if you are as risky or riskier than the average employee. To use myself as an example, I was laid off a couple of years ago from an employer which had a high average age and a high smoking rate (average age: late 40s to early 50s, 10%-20% smoked, if I had to guess). Their health plan had a 300$ per year deductible. As a result, their COBRA premiums were about $1500 per month for a couple.

I was laid off a couple of years ago from an employer which had a high average age

A charming aspect of our for-profit health insurance system is that this is a concern for employers, which leads to age discrimination. Even under Obamacare you can have a 3:1 range depending on age. If we're going to have that kind of crap, why not go back to the old system where insurance would cost a fortune if you had existing health problems. How is that any more discriminatory? No other country does it this way. In Germany for example, where insurance is mostly handled by non-profit insurance companies, you can only vary premium costs depending on where you live. Like other countries, the per capita health care expenses are at least a third less than the US (as a %/GDP - the difference is greater if you use exchange rate or PPP).

Yes, I'm in my 50's. If I have to go back to COBRA or "open market", that will cream me. It's ok to screw me because of my age, but the fact that I'm in good health doesn't buy me anything. Basically I spent decades subsidizing the health care of those who were older or less healthy than me. I'd be fine with that, except now that I'm older it's a big "SCREW YOU".

Not for many years. They're simply an umbrella organization that sells a branded product. Many of the companies providing the insurance are for-profit. Moreover, the behavior of even some of the non-profits under the umbrella is questionable, because they're loosely regulated and/or the regulation isn't enforced. I mentioned that one of the reasons the German system works is that the insurers are very tightly regulated.

insurance was much cheaper when you were in your 20s, than it is for someone who is in their 20s today

Insurance for anybody was cheaper when I was in my 20's. The problem is medical costs inc

No. Not really. There is this prevailing myth that you need to be dependent on your employer for health insurance coverage. It's pretty bogus really.

The ACA does not improve the state of things.

Says the person who either has a good health record or never actually shopped for private insurance.

Pre-ACA, if you had anything less than a very good health record and shopped for private health insurance, you would find yourself either paying very high premiums or being pushed into your state's last-resort h

The idea behind a universal health care system is that in such a system, you get the same or better health care for a lower price. It's not a matter of the government subsidizing your health care, it's a matter of giving increased power to the consume

I just got laid off (1/3 of our office closed). not dell; a very small company.

my health payments when I was on my own non-group plan was in the $700/mo range. hella expensive for one person (I'm over 50, though). when I took a job as a contractor, after 6mos I was able to join the contract company's health plan. my rates went down to about $500/mo. finally, I joined fulltime after those 6mos and had my insurance monthly go down to less than $300/mo (the company kicked in a bit, of course, so my total

When I left my last job the COBRA coverage was $600 monthly for everything and $75 for dental only. Not going to happen. The scam is that you don't (or didn't before ACA) have an option to purchase a cheaper option.

Yes the snow is quite red up here. However it's not from the communists. It's from the politicians in the Harper government falling all over themselves to be more like their idols, the American Republican party. Also it seems like they are hell-bent on Americanizing Canada in any way they can. If it weren't political suicide, they'd have scrapped public healthcare insurance a long time ago. But time will change that, and they will do it if they are in power too many more decades.

Also it seems like they are hell-bent on Americanizing Canada in any way they can. If it weren't political suicide, they'd have scrapped public healthcare insurance a long time ago.

Be careful. If they're anything like American Republicans, they won't stop until they find some sneaky, underhanded way to undermine or completely dismantle it. And they can be very clever about it. Look out for obscure treaty agreements that block it, obscure funding measures that quietly de-fund parts of it one piece at a time, and other measures that sneakily bypass the traditional legislative process to effectively destroy public healthcare (while allowing legislators plausible-deniability in its death)

I don't know anybody who thinks there is a free lunch, but I do know people who ignore facts. For example, all those countries with their evil socialist healthcare pay at least 1/3 less (%/GDP) than the US for universal coverage and outcomes just as good. I'm not so much an evil socialist as a cheap bastard. I'm tired of getting ripped off.

I'd be more inclined to believe what you say if you could explain why per-capita healthcare is so much more expensive in America than any Eurotrash country or the Frozen North above the 49th parallel but the outcomes are about the same.

Health care ended up being tied to employment because everybody worked.

You're ignorant of history. Health care ended up being tied to employment because there was a wage freeze during WWII, but a loophole let employers add benefits.

It was our grandparents who made this nation the greatest in the world.

And it was our grandparents who fought (sometimes literally) for better wages and working conditions, Social Security, and a host of other evil things. If it hadn't been for the employer based health insurance in WWII, we'd likely have gotten UHC in the late 40's. We also would have saved trillions of dollars because of it.

Universal Healthcare will be part of that after Obamacare fails

Let's hope we don't become a socialist hellhole like Canada, Australia or Japan.

Just join the Occupy Wallstreet crowd and stand in line for a government handout.

If you want a handout you'd be better off on Wall Street. The banks got handouts that are beyond the wildest dreams of anybody in the OWS crowd.

Health care ended up tied to employment because, during World War II, there was a wage freeze. Unable to increase wages, employers used fringe benefits to compete for employees, and one of those benefits was subsidized health insurance.

This should have been done by the previous management. Dell is running a company whose business is in serious decline where no-one really knwos where the market will be in five to ten years time. Doing anything else would be commercial suicide.

Of course people want to lay off 15% of the workforce. That is very typical in leveraged buyout processes and part of the plan from square one.

You are take out big loans to buy the company, knowing you are going to immediately gut it maximize profits in the short term so you can pay off the loans. Then you continue to milk what remains as profit, letting the business decline knowing you can sell off chunks to get the last drop of value out of the company, and then at the very end, when you have loaded it up with debt again, you declare it bankrupt and walk away.

If this were done by the previous management, the stock price would have gone up and M. Dell would not have been able to purchase the company. Hence, leaving the company limping along was probably the plan all along.

Um it said in the title that Dell is now a privet company there are no stockholders to screw

Guess you missed the part where he implied deliberate mismanagement to keep the stock price down when it was still public in order to keep market capitalization lower and make the leveraged buy-out possible. I'm not saying that he's right, but if he was then his characterization that it was a failure to uphold the fiduciary duty to those shareholders seems reasonable. Finding enough evidence to prove it in a court of law as part of a (past) shareholder's lawsuit would be the tricky part.

Yeah, this is probably one of the most stupid Slashdot summaries ever, but then, it's based on an article from The Register so I guess I'd be a fool to expect anything other than sensationalist propaganda.

The fact is that the alternative to Dell reinventing itself which yes, involves massive layoffs, is that all 110,000 employees lose their jobs instead. Surely it's better to lose under 15% of the workforce than end up with the whole workforce screwed?

IMHO, schwit1's summary is a typical leftist rant that assumes that every job position in the company is valuable and should be permanent even if the company is bankrupt. To that I say "Should the people who used work on the incandescent light bulb production lines still be allowed to make them?"

Dell is running a company whose business is in serious decline where no-one really knwos where the market will be in five to ten years time.

Uh, the IT sector has changed drasticly every 5-10 years, so no one knows where anything is headed.

10 years ago, Symbian, PalmOS and Windows Mobile were king (hell, Microsoft released PocketPC 2003, considered to be first "real" version of Windows Mobile competitive with PalmOS). 5 years later, they were in serious decline (iPhone, 2007). And yet, during those times, al

Of course, with a private sponsor in charge of the recently public company, the only thing that matters now is maximizing cash flows......

How is it different now that they are private? Don’t public firms try to maximize profits? I know back in the 80’s, LBO tried to generate as much as cash flow because they have mortgage everything and were up to their eyeballs in debt. Dell is nowhere near that.

No, this is because Mr. Dell wants to take Dell Inc. in a new direction as fast as he can – away from the low profits of a commodity business.

The difference is if the company was public all the metrics that the big financial companies would use would go completely haywire during the layoffs, causing the stock price to drop like a rock (even if it was good for the company in the long run). As such, once private you can do these sorts of maneuvers without the financial markets screaming bloody murder, since you're not tradable.

I seem to recall the markets applauding big companies that "slashed costs" by layoffs, even though the long-term results might be disastrous.

Believe it or not, once upon a time layoffs would cause a company's stock price to fall. The markets figured, usually correctly, that layoffs meant the company was in trouble. In Dell's case I'm afraid the layoffs might be necessary, as the company is in serious trouble, but when profitable companies have needless layoffs, it's ridiculous. You can almost always make the company's finances look better in the short term with layoffs.

The best analogy I've heard (and this from a serious business analyst) is that many of these companies are like the participants in a body building contest. For those that don't know, they usually take lots of diuretics and what not for a few days before the contest to increase muscle definition. It also leaves them weak as hell. You could probably knock them over with a feather. That's the way a lot of companies are these days. Superficially they look great on the balance sheet, but they're actually quite weak when it comes to anything beyond the next quarter.

I don't think layoffs are a problem at a public company, but revenue decreases seem to elicit a negative response from stockholders. The market punishes companies that are trying to downsize, even if it means better long-term viability. If these layoffs will result in reduced revenue, the market would probably crush the stock price.

Are you slashing costs because you business is going down the tubes? You trim costs to match reduced revenue. To overstate the case, the PC market is going down the tubes.

Are you trying to make yourself look good? There are companies that need to lose weight. Some do it via the crash diet method – not very effective but it looks good in the short run. Some do long term cuts. In Dell’s case they can cut a good number of accountants because they no longer ne

The PC market is not "going down the tubes". It's saturated. People will continue to buy replacement PC's / laptops, but the demand has stabilized, and people are now buying replacements, rather than new units. 5 years from now people will still be buying replacement PCs.

The PC market isn't going down the tubes. It just has reached a point where it isn't growing, because there are so many players for that market. However, even now, the desktop isn't going away. It is a content creation device while tablets and smartphones are intended to be content consumption items. Yes, in theory one can use a BlueTooth keyboard with a tablet, but that tends to be a cautious exception.

It wouldn't be hard for Dell or PC companies to revive the desktop market. It could be little things

To serve their stakeholders, private companies must maximise net revenue, while publicly traded companies must maximise share price. The means to achieve those two goals are not always the same, because very often the market price is decided by idiots.

Not in Dell’s case. Private does not mean personal property. Dell has other owners then Mr. Dell and owes other people fiduciary duty – such as the bond holders. So not frogs, and there is less of a difference between short term and long term profits.

Risk is one thing that Mr. Dell has better control, as in “let’s dump or PC business and strike out for new grounds.” Dell could squeeze a lot of profits out of a declining PC business at low risk. Warren Buffett was able to do so

Not in Dell’s case. Private does not mean personal property. Dell has other owners then Mr. Dell and owes other people fiduciary duty – such as the bond holders. So not frogs, and there is less of a difference between short term and long term profits.

Risk is one thing that Mr. Dell has better control, as in “let’s dump or PC business and strike out for new grounds.” Dell could squeeze a lot of profits out of a declining PC business at low risk. Warren Buffett was able to do so with Berkshire Hathaway – you know – the company that made broadcloth.

And how do you know that the other major investors in Dell aren't frog-lovers?

I will have to disagree with you there. First, I think you mean earnings, not “net revenue”. Second, there is no difference if 1 person owns the firm or 1 million – the purpose is to maximize value for the owners. The calculations of both earnings and value are the same; it is just that for the private firm the numbers are more opaque to the public.

Well, value is a bit different. You post the accounting numbers and get the consensus value (from the stock market) back for public firms. For

On the one hand, layoffs are frequently considered a 'good thing' by investors, if they believe the company may still be capable of functioning afterward. I don't think Dell is in this boat, but layoffs have upon occasion been taken as a sign of the end times for a particular enterprise.

As to your point about taking it in a new direction as fast as he can, away from a commodity business; the challenge is Dell has yet to show capability in any candidate market. Investors eat up announcements by IBM for dec

Cash flow is similar but different from profit. It's even more important than profit. In general, your cash flow is a much better indicator of the healthiness of the business because it represents the ability to purchase goods and make investments. Dell recently made a lot of acquisitions which cuts severely into their cash flow. When you hear that they're trying to maximize cash flow there's trying to recover a drop, likely significant, in cash flow due to all those acquisitions.

PC sales have been steadily declining for years. Large PC maker lays off employees. And? Same thing happened at record player companies. And typewriter companies. And factories that produced film. If you want to complain about something, the complain about how Dell couldn't turn itself into Apple or Google. Laying off people is the only way to save the company at this point in time.

The PC business is still huge, but what Dell was built on was rapid custom-assembly of components. Between integration and computers out-perfoming the needs it's much more back to the traditional "we need five million laptops of model X" production lines. You even see Apple moving away from the traditional components to custom made-to-order formats that only fit the Mac Book Pro or Mac Pro. Lots of companies still makes lots of money on the PC, but Dell is struggling to find where they can add value to the

In my personal experience, their quality has been declining in recent years (poor internal design, bad fit and finish, on the boxes by them that I've had to use). A shift to mobile computing is part of the blame, probably, but I don't think the Dell brand has the same strength in recent years as it had in the past.

Usually when big companies make big moves like this their stock price goes up as they are cutting costs. This article makes it osund like it would have been a bad thing to fire people while it was still a publicly traed company. Publicly traded companies fire people all the time, it' snot better or worse or different now that they are private.

you have to break a few eggs. Dell is one of the american computing greats, and it would be a very sad day to see it taken over or file for bankruptcy. So in order to turn a company with more money leaks than a welsh allotment, you have to fire people and rearrange departments. Apple did it in 1997, Microsoft will do it in the next few years (hopefully), IBM's been doing it since IBM made computers. If Dell wants to become more than just a hardware manufacturer and OEM for Windows, they need to cut back and re-evolve. I have great expectations of Dell since it's gone private. I hope my expectations are realised...

That's one of the reasons I cannot feel any sort of loyalty to any company I've worked for ever and I laugh at those who do.

I'm a "soldier of fortune" (yes, I've been called that in pre-job/post-job interviews) but it's all business at the end of the day and your beloved company won't feel any regret of firing my or your ass when the gods of the spreadsheets declare their thirst for blood. Hell, even Steve Jobs was fired from Apple, which the guy founded.

Also, all that crap about corporate values: I don't give a fuck! The only way I'm staying somewhere is because I'm either better paid or because I have better conditions, if that's not the case, I'm gone. And so do you.

That's probably the best piece of advice you could ever give any kid embarking on his/her career. My son is still in middle school, and he's free of any delusions about employer-employee relationships.

In a sense we're all just prostitutes peddling our time and assets to sleazy, uncaring creeps.

This is in no way meant to be insulting to prostitutes. I can respect a good honest hooker.

Fuck getting used to it. You should deal with the reality of it, but "getting used to it" means thinking of it as something that's reasonable. That's bull. A few decades ago this was not the norm. Large successful companies didn't do it. IBM started a "no layoffs" policy during the Great Depression and IIRC they did okay afterwards. This "we are all temporary employees" has nothing to do with any essential new business requirements, and everything to do with politics and a shift back towards the Gilded Age.

The discussion you commented on was not about Dell in particular, whose layoffs may be necessary. However those "temporary jobs" are also with successful, profitable companies in stable or growing industries. That's the part that's bull.

It doesn't have to be that way. You talk like companies must have absolute freedom to hire and fire instantly, for any reason at all, because staying competitive demands it. Even if a massive layoff is the equivalent of hacking off their left arm to lose weight, they deserve and need the option to do that. If a person did that for a reason like that, the rest of us would commit them to a mental institution. But before things reached that point, friends would likely notice that something is very wrong, a

This is slanted wrong. Public companies have share holders to answer to. They've sold their soul to the devil, AKA: Share holders who almost always buy shares to make money.

A private holder, a guy who is already rich, he can do what he wants. Maybe try to make money. Maybe try a long term growth strategy that won't make money for a few years. Maybe keep people on the payroll who should be layed off now, just so they will be ready to go to work in 6 months. I'd be way more critical of what public companies do to make money than I would be critical of private companies.

There are quite a few examples of privately held companies going the extra mile for their employees at the expense of short term profits.

"The Malden Mills factory burned down on December 11, 1995. CEO Aaron Feuerstein decided to continue paying the salaries of all the now-unemployed workers while the factory was being rebuilt. By going against common CEO business practices, especially at a time when most companies were downsizing and moving overseas, he achieved recognition for doing the right thing"

I feel sorry for the 15,000 workers about lose their job, Dell is walking a thin line and Michael wants to make sure that the company that bears his name stays around. Dell has become a bloated pig and unfocused. They are also not responding to customers demands where they should and expanding into markets that support their core strengths.

We were notified that our support phone number was being changed. When I called it, I was sent to a call center in India where it took me half an hour to get a return label sent out. We had a replacement part shipped to us the previous week but there was no return label included so I was calling to get one.

Half an hour to get a label sent out. Pathetic.

I guess it's just another example of private industry doing it better than the government.

... with a private sponsor in charge of the recently public company, the only thing that matters now is maximizing cash flows...

I'm going to assume the author meant "recently private company", and "maximizing revenue" as this would be the only way that sentence would make sense. Of course, even after the corrections, the author is still wrong. The major problem with public companies is that shareholders only care about relatively short term profits. This usually narrows the focus of any business to doing whatever makes this quarter better than last quarter. Being private is a huge advantage precisely because it allows you to look at the bigger picture beyond short term profits. Terrible summary.

Jesus, the summary's written like an indictment of capitalism. "The only thing that matters now is money", as if that weren't the stated purpose of every company. Dell's not a charity created for its employees. And even if it were, can you argue that this wouldn't be in the best interest of the remaining ones, so that the company still exists a few years from now?

I get the whole Let's-hate-on-private-capital bent. Sure, Mitt Romney was a tool. But you're really not helping your credibility with this Corporations-are-evil hippyism.